Like any other industry, SaaS companies also look towards revenue as the holy grail. For investors, profits may be non-existent for years and yet, high revenues would mean more investment, more interest, more PR, and eventually bigger IPOs.
All of this is complemented by customers consistently increasing, sales pipelines look healthy, hirings are up, and both industry and public opinion is glowing. On paper, everything is as good as it can be.
Yet, underneath all these numbers, something may already be underway that could undermine all that.
Something that makes customer acquisitions more expensive, sales cycles longer, increase churn, increase support and delivery costs, and leading to existing customers generated less expansive revenue.
At the end of the day, all this means that while the company is indeed generated more revenue, it’s getting less value from every dollar spent, every employee hired, and every customer added.
That is the SaaS growth illusion in action.
Growth Isn’t The Same As Business Performance
Revenue growth is by far the most important metric in the SaaS industry. However, it should not be the tell-all metric within a business.
Imagine a SaaS company that grows its annual recurring revenue from $2 million to $3 million. A massive improvement that would drive wild celebrations in any company. However, achieving that growth has meant:
- 60% more sales and marketing expenditure;
- Significantly larger sales teams;
- Longer implementation cycles;
- Increasing churn;
- More discounts.
Yes, the company grew, but the economics of that growth are no longer the same. It is at this point that companies must ask, “What is it costing us to grow?”
The Problem With Looking At Metrics Seperately
On their own, every company has their own number of metrics.
Most of these lead to sales tracking pipelines and conversions, product tracking usage, customer success tracking retention, and finance tracking growth and expenses.
However, the problem lies in these metrics living in complete silos, with their interpretation differing based on who’s accessing them. Different stakeholders looking at the same numbers may interpret them to meet different things.
So, one department may have done its job in ringing the alarm bells about the growth problem, and yet, another department looking at it may interpret it as “growth is up, can be done better”, with emphasis on the first part.
In other words, a business may appear healthy from different individual perspectives, and yet, be less efficient when viewed as a whole.
Why MagneFo
MagneFo’s been designed to give everyone in the company, especially the decision-making C-suites a live pulse into what’s going on in their organization.
No different interpretations, no filters, and no waiting periods. Raw data as it happens, with insights that deliver the straight skinny to those incharge of making decisions.
Request a demo today and see how we can help your organization become more efficient in its growth.